FIN 640 QUESTIONS1.If the world had stable foreign exchange rates,
FIN 640 QUESTIONS1.If the world had stable foreign exchange rates, your text on interna±onal ²nance wouldbe a much thinner book. Because we live in a world of o³en rapidly ´uctua±ng exchangerates, one of the core issues of interna±onal ²nance is studying ways the interna±onal²rm can minimize its risk from exchange rate losses in its interna±onal transac±ons, itsinterna±onal investments and in its repatria±on of overseas pro²ts. Through the studyof the materials in this course, you will learn many sophis±cated techniques forminimizing risk. The following ques±on is designed to get you thinking about the topic.You are the CFO of a U.S. ²rm with a wholly owned subsidiary in Mexico thatmanufactures component parts for your U.S. assembly opera±ons. The subsidiary hasbeen ²nanced by bank borrowings in the United States. You have just been told by oneof your analysts that the Mexican peso is expected to depreciate by 30% against the U.S.dollar on the foreign exchange markets over the next year.What ac±ons, if any, should you take?2.Choose a country and show the U.S. exports to that country and imports from thatcountry for the last 10 years.Note any changes and discuss the reasons for the changes.
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